Timing The Coming and Ongoing US Market Crash

Wednesday, July 27, 2011

TAKE A LOOK AT THIS CHART BELOW OF THE DOW WHICH IS UPDATED AS OF 11:15AM TODAY.

WHY SHOULD YOU BE SCARED YOU MIGHT ASK?

Well you should be because this is the 3rd of 5 legs down from the top of 2008 which will break the lows of March 2009 and will continue on down until it completes all 5 legs. The ultimate bottom will be equivalent to the ongoing crash in Japan's Nikkei 225 Index which topped in 1989 around 40,000 and crashed below 5000. This means of course that all Mutal Funds, Shareholders, Pension Funds will be obliterated to the point of no return at least not in your lifetime or mine. So whats the average time to recover all those funds lost? The average is 18-25 years but in reality it could take much longer to recover and in the end analysis will be of no use to you
if you need your funds to support yourself. What would I do? Run like hell because the odds are stacked against you in a major way. I would go with a safe 2-3% return and count your luck stars you managed to save your capital. If you are afraid of missing out on potential gains in your investments then use 5% of your capital with a leveraged product such as Options, Foreign Exchange Derivative's or Forex to say take a position wherby you would say Sell or Buy The USD against another currency such as the EURUSD, GBPUSD, USDCAN, OR SWISS FRANC (USDCHF). How would you do that you might ask? You would use Technical Analysis to ascertain if say the US DOLLAR (USDCAD) is going up or down vis a vis the Canadian Dollar. Look at the chart below.

The white bars (Up)and red bars (Down) on the top part of the chart is the price. Each bar is 1 hour in duration but can be easily changed if you wish to trade a different timeframe such as weekly, daily, 4 hour 1 hour as above and lesser timeframes such as 30 min, 15 min, 5 min, 1 min etc. I do not recommend you go less than 1 hour timeframe, The MACD Indicator (large white image) just below the price is optimized for 1 hour timeframe and creates a staircase effect when it decides to move up or down from a consolidation or

sideways pattern. If you look very very closely under the white bars (candlesticks) you will see green dotted lines which is the entry point of my trades using the MACD staircase effect as an entry point. The Trade was entered approx 2 hours ago and I bought 3 lots with margin of exactly $500 per lot times 3 lots, and then I added (3) 1/20th of a lot margin=$25 so in total I am up $2164.97 within the 2 hour timeframe from when I placed the trade. All you need to trade successfully is the above configuration exactly as I laid it out and wait for the staircase effect with white candlesticks (price) to enter. When price goes over the top of the Macd which appears as a

Mountain effect then you get out because the staircase will start down instead of up. So in effect you are only trading 2 patterns re an up or down staircase. If you try to trade any other patterns you will lose. Something you should know is that the USDCAD trades the opposite direction to the following currencies at any one point in time. So if the USDCAD (THAT IS THE US DOLLAR GAINING ON THE CAN DOLLAR) THEN GBPUSD, USDJPY ,GBPJPY,USDCHF, ETC WILL BE TRADING DOWN ON THE STAIRCASE.

Lets create a Market for IBM stock. Lets say there are exactly 1 million holders of IBM stock
and there all in bed one very fine morning when the Markets open, that is except for exactly 2

owners of the stock who are wide awake and pondering their money problems. One guy figures, if only I had more money I could buy a pack of smokes, where in the name of god am I going to find $1 dollar to buy a pack of smokes. Then he remembers he owns exactly one share of IBM stock. By this time his nicotine fit has driven him up the wall and he is tearing his hair out, somebody give me a cigarette he shouts. Enough is enough, he's taking no more bull so he decides to sell his 1 share of IBM stock. He calls his Broker and sais "Sell my 1 share of IBM stock "AT THE MARKET" a legal stock market term for accept anything you can get, normally the spread is fairly tight except for the other 1 MILLION less 2 owners of the stock are in bed so there are no standing offers in the Market except for MR Scrooge the other guy in the story, he's wide awake and wants to buy IBM for little or nothing, so he already has a standing offer in the Market for exactly 1 share of IBM stock for you guessed it 1$...yes thats right one dollar. The Broker repeats back the order to "Sell At The Market" and Mr Nicotine Fit sais yes let it fly.

And so there you have it Mr Nicotine Fit has just sold IBM stock for exactly one dollar,it was previously trading at $100 dollars, yes you read that right 100 dollars. What happened,how can that happen. Well the other 1 Million owners less 2 were in bed and there was only 2 people in the Market and it only takes 2 people to agree on price or value. Mr Nicotine Fit established the new value of 1$ for 1 share of IBM stock. So the other 1 Million guys wake up and check their share price and scream blue murder

" What happened".Therin lies the lesson of you got it "LIQUIDITY"

LIQUIDTY or NO LIQUIDITY is the absense of particpation in a market such

that transactions cannot be concluded.

Thats how America went broke, first starting with Enron, then Long Term Capital Management, and you got it the Mortgage Market Meltdown

ALL BY THE USE OF DERIVATIVES IN THE PRESENCE OF NO LIQUIDITY.

The difference between the example of Mr Nicotine fit selling IBM stock which was worth
$100 for $1 a 99% drop and Derivatives are miles apart in the sense that a 5% move will
wipe out any Derivative bet so it doesnt take much imagination to figure out how a 5% move
can happen in any Market like the Mortgage Market. I used to trade Options on Stocks and
Indices like the Dow Jones Industrial Average and then came the the Crash of October 19th
1987 and the Dow dropped 508 point or 22% in 1 business day. So you see a drop of 22% would wipe out any Derivative bet 4 times over.

So now you are probly wondering, thats crazy , who invented or allowed these Derivatives
to happen and be traded by Banks with DEPOSITOR'S MONEY I might add.

To understand that we need to travel back in time and the year was 1933, just at the bottom
of the crash which began in 1929.

Crashes or Booms and Busts has always being a feature of Markets going back to the Roman Empire, and throughout European history including the Tulip Mania and the Mississipi South Sea Bubble. There is always a different reason for a crash each time, it just so happens that derivatives were at the root cause, but you must remember at the end of the day its a game like football and for any game you need a referee that enforces the rules, ah yes the rules, we forgot about the rules, but who sets the rules.

1933-THE GLASS-STEGALL ACT

The act was brought into play to create a chinese wall between Banking as we used to know it and Investment Banking meaning Banks at that time investing in Stocks and Bonds with depositors money which left the banks broke when the Market crashed in 1929.

It was a very wise act and imposed strict rules on Banks and their limitations to gamble with depositors money. Then just like the NFL the Game began, but we need some players, so lets pick some of the players involved. The NFL has its Rules until their changed that is, so who changed the rules in the Markets.

WHO CHANGED THE RULES.

The Markets recovered from the crash of 1929 but not before many mini crashes along the way.The American Economy was chugging along with lots of Dollars flooding the World. The year is now 1971 and then President Richard Nixon decided that Gold then pegged at $35 an ounce was an impediment to progress because there was not enough Gold in Fort Knox to back all the Dollars flying around the World being held by Foreign Governments so Nixon set Gold free from the Dollar. Gold soared to over $800 an ounce by 1981 and then came along the Reagan Era now thats where the real story begins.

REAGAN ERA.

Reagan decided that the de-regulation of Markets was the way to go to enable free trade so he set out on a course of action that would put America in Peril and bring it to its knees with the aid of Clinton. It was during the Reagan Era that it was proposed to repeal or cancel the Glass-Stegall-Act to allow Banks to invest in exotic instruments which were invented in 1973 by the financial engineers. Reagan was being advised by guess who, you wont believe it Milton Friedman and under Clinton who was advising Clinton, you guessed it Alan Greenspan.

Both economists were from the School Of Rational Expectations in which Markets find an Equilibrium the way water floats in a pool.

Clinton repealed the Glass-Stegall-Act in 1994 because he agreed fundementally with Reagan that Markets must find their own equilibrium and so now THE REAL GAME IS ON, BRING OUT THE PLAYERS.

We need some players so lets create a wee list of the culprits.

STARTING AT THE TOP.

REAGAN AND CLINTON

FEDERAL RESERVE

INVESTMENT BANKS:

JP MORGAN

MORGAN STANLEY

LEHMAN BROTHERS

BEAR STEARNS

AIG

FANNIE MAE

FREDDY MAC

FDIC

So now with the Glass-Stegall-Act removed the investments banks set their financial engineers to work. As an aside issue, Alan Greenspan was working diligently as a Director of JP Morgan before he became Federal Reserve Chairman and he lobbied very hard indeed to have the Act repealed.

Answer......Make sure the Broker is registered with the NFA (National Futures Association) in the United States. Brokers must comply with NFA rules to set aside adequate funding to cover any unforseen financial Global calamity etc so funds that you deposit with a Broker is held seperately either in London, England or New York. I will write about various Brokers going forward re pros and cons. Recently in the United States as a result of the Frank/Dodd bill leverage maximum was adjusted downward from upwards of 400:1 , thats notation for 400 to 1 leverage to 50:1. This is the outcome in the States as a result of the financial crisis. so some brokers in order to maintain the high leverage say 200:1 they had to move their servers to places such as Cyprus or Malta. although they still maintain Institutional and still trade for large such accounts.

One Broker I approve of is Easy Forex who is registered with the NFA and its holding Bank is Barclays in london, England. They are in fact the only Broker that will allow you to open an account for $25 yes $25 and allow you to trade by depositing money with your charge card or debit card and allow you to trade within minutes which is unheard of. Normally you can only open an account by going through a rigorous process involving providing exact very enlarged driver license photo id plus other ID and a financial background summary and then you will have to pay for a money order to transfer money. Not so with Easy Forex they most certainly make it easy to open an account and trade although you should deposit $500 to start and trade very small with that money no more than 5% at a time. In addition they offer free Technical Analysis Training and lots of hand holding. If your really nice to them they may even adjust your Spread or Commission. If you wish to learn more click on their link below.

Monday, February 14, 2011

DAILY COMPACTED CHART RESUMES ITS BEAR MARKET, EXPECT PLENTY OF DOWNSIDE ACTION WITH SOVERIGN NATIONS THREATING TO WITHDRAW FROM THE EURO AND 11 COUNTRIES AT RISK OF DEFAULT. SPAIN WILL MOST CERTAINLY DEFAULT WHICH WILLAFFECT LENDER BANKS ACROSS THE EUROZONE AND TRIGGER A DOMINO AFFECT. SPAIN WILLNEED A TRILLION EURO BAILOUT.